Forecast Is Clear for Solar With One-Year Extension of Federal Grants

For solar industry advocates, a ray of light emerged recently from the new Congress.

As reported in the January 2011 issue of ELECTRICAL CONTRACTOR, Congress passed and President Obama signed tax legislation that included a one-year extension of federal grants for renewable energies in December. The extension came just as the program was scheduled to expire at the end of 2010.

The U.S. Treasury’s 1603 grant program was first adopted in 2009 to replace the tax credits that renewable-power developers had come to depend on for so many years. When the financial markets imploded, the credits became useless. Startup energy developers, who could not claim the credits based on their own balance sheets, typically sold them to investors to raise cash for their projects. In the throes of the recession, those investors disappeared.

The 1603 program offered a better alternative for small energy developers. It eliminated the need for investors by providing cash up front for developers to finance their fledgling projects.

The grants are available for a variety of qualified renewable-energy projects, including small wind turbines, fuel cells, biomass facilities, geothermal heat pumps and microturbines. The program has been beneficial to all renewable industries and to the economy as a whole. According to the think tank Center for American Progress, the grant program helped create 40,000 jobs in the renewable industries and could help create another 100,000 more jobs now that it has been extended.

The Treasury reports more than 1,500 projects received in excess of $5.5 billion in funding as of November of last year. Wind energy received the greatest share of funding, with $4.7 billion in grants. While the largest number of grants went to solar projects—the grants funded nearly 1,200 solar projects compared to 209 wind projects—wind projects received more per grant. According to the Treasury, the grants leveraged an additional $18 billion in investment for solar projects in 42 states. The Solar Energy Industries Association credits the grants with helping the industry grow by more than 100 percent in 2010.